Sections

The Pensions Regulator

Regulatory guidance

Regulatory guidance

Transfer values

Practicalities, administrative expenses, presentation and pensions to former spouses or civil partners

Practicalities

  1. In all but the smallest schemes, trustees are likely to find it convenient and cost effective for the scheme's administrator to calculate transfer values using instructions provided by the actuary. Trustees should discuss with the actuary and the administrator how best to ensure that calculations are carried out correctly. This might be achieved by the trustees asking the actuary to undertake sample checks on a range of cases. In addition, it would be good practice for trustees to have transfer values over a certain amount routinely checked.
  2. Even where the scheme's administrator normally calculates transfer values, it may be more cost effective for the trustees to ask the actuary to undertake the calculations for cases involving non-standard benefits, or for sections of a scheme not expected to generate many transfer quotations.

Allowance for administrative expenses

  1. Trustees are permitted to reduce an ICE under the best estimate method to reflect reasonable administrative costs associated with the transfer process. However, if they decide to do so they must offset against those costs any reasonable administrative savings for the scheme. The trustees must disclose any such reductions made when providing the statement of entitlement.
  2. Administrative costs are limited to dealing with a typical transfer on the assumption it will go ahead. These costs can usually be estimated based on past experience of dealing with members transferring to a range of receiving schemes.
  3. The administrative savings which must offset any costs will be the capitalised value of the expected cost of:
    • administering the deferred pension up to retirement;
    • dealing with a deferred member at retirement; and
    • administering the resulting pension and dependant's pension after retirement.

Presentation

  1. When a cash equivalent quotation is issued to a deferred member of a defined benefit scheme by way of a statement of entitlement, trustees must alert the member to the fact that information about transfers that may assist the member in making a decision is available from:
  2. Our guidance on inducement exercises is primarily intended for trustees, employers and advisers but, where the quotation is being issued in conjunction with an inducement exercise, scheme members may also find it helpful.
  3. It would be good practice for trustees to make available reasonable details of the scheme's relevant transfer value basis (including the underlying assumptions used and the treatment of options and discretionary benefits) on request from a member or a member's financial adviser.
  4. Because benefits deriving from contracting out of the state second tier pension (GMP and post 6 April 1997 service) when transferred to a money purchase scheme are still subject to certain restrictions, trustees should ensure that the amount of the transfer relating to these benefits is identified.

Former spouses' or civil partners' pensions

  1. Where relevant, this guidance will need to be considered in conjunction with legislation on pension sharing on divorce. It is recognised that this guidance does not outline the specific areas where considerations in this area should be made, nor does it attempt to do so. This is a specialist area where trustees should take the appropriate advice when considering these cases.